Dueling Studies On Ohio’s Tax Reform System

Jul 23, 2013

Some Ohio retailers say the new state budget will help the state’s brick and mortar stores by equalizing the tax structure for online purchases.

And as Ohio Public Radio’s Jo Ingles reports, a recent study says that change will also mean more jobs in Ohio.

Flowers are Jayson Waits’ business.  And he says it is for his Bloomtastic Florist shop grow and thrive when he has to collect sales tax but internet florists don’t.

Waits – You see 10 years ago, my competitors were the flower shops across the street or downtown but today, my single biggest competitor is 2200 miles away – the internet florist.  For us, it’s hard enough to compete against online retailers without having a five and a half percent tax break because of the sales tax loophole.

That sales tax loophole means retailers who are not based in Ohio and do not have online shops here don’t have to collect Ohio sales tax on their sales.  Ohio is working to close that gap.  The new statewide budget that was signed into law taxes some services that previously haven’t been taxed.  And Gordon Goff with the Ohio Council of Retail Merchants is pleased Ohio lawmakers have passed a law that specifies where tax revenue would go if the federal government passes a law that requires tax be collected on all internet purchases nationally. 

Goff – The Ohio General Assembly passed language in the budget that would make the state compliant with the marketplace fairness act.  What this language essentially does is direct revenue from the online sales tax collection to lower the income tax rate in the state.  Online sales revenue would go to the income tax reduction fund which would trigger an automatic income tax cut for Ohioans.

A new study by conservative economist Art Laffer shows Ohio could get 46 thousand new jobs if congress passed this measure.  But not everyone is convinced tax cuts will grow jobs.

Schiller – Well you know they said that in 2005 and we are still waiting.
That’s Zach Schiller with Policy Matters.  His left leaning group recently released a study of its own that criticizes the tax reform in the new state budget.  Schiller notes when lawmakers passed tax reform in 2005, it was touted as a way to build jobs in Ohio…..but he says it didn’t.

Schiller – For those people who say tax cutting is so important that it will lead to jobs, we have the proof. We don’t need a lot of additional studies or have a lot of debate.  We’ve seen it.  And we know what happens and it hasn’t worked so why would we repeat that?

Schiller says his group’s study on the new state budget shows the tax reform provides little to middle income families and actually costs low income families more.  Schiller says the best way to grow jobs in Ohio is to increase investments in communities by giving money for schools and local governments.  That’s what he says influences new businesses to locate here in Ohio.